Dallas Police and Fire Pension Boss: Fund's Risky Investments "Are Building America"

The Nasher Sculpture Center and the developers of the Museum Tower project are continuing to hammer out their white light, white heat debacle behind closed doors. They recently hired a mediator in lawyer Tom Luce, who promptly asked both sides to quit talking to the media already.

Above, however, you will see a video from George Tomasovic, a First Battalion Chief with the fire department, a licensed CPA and, most importantly, the chairman of the Dallas Police and Fire Pension Fund's trustee board. In the video, Tomasovic, without making reference to any particular huge public relations disaster, insists that the pension fund's "alternative investments" are sound and represent an overall commitment to this great country of ours. Anyone who disagrees, he adds, is guilty of "old-fashioned, out-of-date thinking."

The pension fund is, of course, the owner of the Museum Tower project, and it's invested some $200 million in the building. The $3.1 billion fund has investments in all manner of things, as a recent Bloomberg article pointed out. In fact, some 52 percent of the pension fund's investments have been in "alternative" markets, like real estate, natural resources and American Idol's production company. According to one research firm quoted by Bloomberg, they're taking on more risk than any other public retirement plan in the United States.

"I don't think anyone would say you should have half your assets in alternatives," Andrew Biggs, a researcher with the American Enterprise Institute, a conservative think-tank, told the magazine.

Tomasovic has already addressed criticisms that the fund invested too much money in a too-speculative real estate venture. In a video released in late April on the pension fund's website (and since removed), Tomasovic assured its members that Museum Tower would be just great once it was finished.

Just two days after the Bloomberg article was released, he came out with this second video, which of course doesn't technically violate the informal gag order Luce has imposed. Throughout, Tomasovic chides the "so-called experts" who continue to criticize the fund's investment strategy.

Real estate, Tomasovic says, is just one piece of the fund's investment plan, along with stocks, bonds, private equity, and natural resources (including alternative fuel truck engines and "apples, nuts, berries, corn, potatoes, beans, and wheat" in "farms across the heart of America.")

"Frankly, I'm fed up with these so-called experts who think that social security and individual retirement accounts will save Americans from a live of poverty in their retirement," he says. "Our investment strategy is solid. We're one of the most diverse pension funds in the country...We're investing and building in America. We're creating new jobs and unmatched economic stimulus. We're creating a secure future for our members. We have the record to prove it, and anyone that doesn't get it is trapped in the mindset of the past."

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En33tlove
En33tlove

Wow! What a shame it is to sit and read these point of views about a pension system that is well respected in both the private and public sector. These men and women protect and serve the citizens every minute of every day. They do not get the benefit of the "great" government social security when they retire. Deferred comp is a joke. They have the best actuaries on hand, and I believe it is the second best pension fund in the nation. And ya'll have that gall to pretty much call them idiots. You all should be ashamed, and get informed. Quit letting the left wing media stir up your jealousy. Be happy that they get to invest their own money, and stay out of the civilian pension fund, which the city controls. I hear that fund is doing real well, not.

Dalguy
Dalguy

George Tomasovic and the Dallas Police and Fire Pension Fund should step up and take full responsibility for the damaging reflected light from their Towering Inferno and replace the glass immediately while the building is still under construction.  It is not too late for them to take the high road, admit their substantial unintended mistake and make it right.  Being "World Class" is not all about bragging.  It is also about acknowledging mistakes and correcting them asap.

Larry
Larry

at least Tomasovic's rhetoric is 'shovel-ready'.

primi_timpano
primi_timpano

From the DMN in 2009: 

Seven officials associated with the Dallas Police and Fire Pension System, including at least one Dallas City Council member, are traveling next week to a three-day energy conference in Abu Dhabi, paid for by the pension system.

District 3 council member Dave Neumann, a pension board trustee who will be traveling with the Dallas delegation to the United Arab Emirates, says the World Future Energy Summit 2009 is a prime opportunity for pension system officials to educate themselves on energy investment strategies. Energy investments account for "millions of dollars" of investments within the police and fire pension fund, he said.

"If I'm to make good decisions on behalf of the people and families in the system, I need to be sure I know what I'm voting on. In order to be a capable board member, you have to make sure that you do your homework," Neumann said, noting that he did not know how much the trip will cost the pension system.

Direct taxpayer dollars will not be used to fund travel, he said.

Officials on the pension system's professional staff could not be reached for comment Friday night.

A roster of attendees on the summit's 2009's Web site lists seven members of the Dallas Police and Fire Pension System attending, though it does not provide specific names.

The members include four board trustees, an investment analyst, chief financial officer and an administrator.

The summit's Web site says 15,000 people are expected to attend the affair, which runs from Monday through Wednesday.

The published summit registration fee is $2,100 per person, with unpublished "special rates" for groups of five or more people.

I

Dallas Deputy Mayor Pro Tem Dwaine Caraway, another member of the police and fire pension board, said he isn't going to Abu Dhabi and doesn't know anything about the trip.

"I'll be in Washington, D.C., for the presidential inauguration," Caraway said.

Texaspainter
Texaspainter

Neumann never met any type of payola he didn't like. Slimy as they come, now he's involved with the Trinity Corridor deal.

mark zero (Jason)
mark zero (Jason)

Is it normal for some members of a board to not have any idea what other members are doing on behalf of the board, with board funds? You'd think they'd at least exchange emails or something.

TURK182
TURK182

I like the way you phrase your article title "Dallas Police and Fire Pension Boss"  going for the reaction to the average reader "Crime Boss" "Union Boss" as if he has control over his minions out doing dirty work for the Big Time Unions in Texas is known for.  Hey hack writer of this article is this an opinion piece or news piece.  Seems to have a slant that these Police and Fire are in the same league as the under world controlling trash pickup ??? Hey maybe we should get in that venture,, "oh weight the Mayor and the City Manager has that one already".  Yet ,not that big of a deal made about it or slanted articles about that.  Have you taken a good look at the great meet and confer agreement that was struck a year a so ago and how DPD and DFD took pay cuts to help the City out of these tough times and accepted the risk of that "speculative venture" that is weighted heavily in the City's favor.

primi_timpano
primi_timpano

 As mentioned above, at 2011 they are underfunded by over 800mm, which represents 21% of their endowment.

Wylie H.
Wylie H.

And this is the City's responsibility... All of this has happened under Miss Suhm's watch, the same person who just got a nice big raise.

primi_timpano
primi_timpano

Take a look at the P&F Pension annual reports.  Beginning 2011 it was 21% underfunded at an amount of over $800,000,000.  In 2009 the fund earned 15.9%, versus 26% for the S&P.  2010 it earned 9.1% (based on annual report, the investments section claims 11; still too low), versus 15.06 for the S&P.  Whatever they are doing is not working; they are only digging a deeper hole.

This interesting note from the 2010 report:

 The System also received the “2010 Projects of the Year” awardfrom American Road and Transportation Builders Association for participation as an equity partner in infrastructure investments in North Texas to rebuild the managed lanes sections of State Highways 121 and 183 and Interstate Highway 820 in Tarrant County, as well as the managed lanes sections of the LBJ express way in Dallas County.

come on
come on

Who do these police and firemen think they are ???  Why should they have a pension ???  Go to work and answer the calls.  Dallas is one of the lowest paid Departments in the North Texas and it should stay that way.  I mean 250,000+ calls for help a year, compared to the 5,000 to 15,000 calls for help in the suburbs.  These guys and gals should try to save some money from their checks and get another of job or 2 to help make ends meet.  I mean come on.  

primi_timpano
primi_timpano

I am not very familiar with the acturarial aspects of these reports but it looks like 28% of pay goes into the fund,  Thwe average salary is $66,000.

Anon
Anon

ha! the City will be on the hook, not the Feds. PBGC insures private plans only.

Oak Cliff Townie
Oak Cliff Townie

Anon yes the city is on the hook  But it is this city .I am Betting on Dallas to have covered is ass  in this .I bet there is some kind of wavier that reduces the liability to pennies on the dollar if the Police and Fire are shown to have mismanaged themselves into insolvency.HA and HA ....

primi_timpano
primi_timpano

 I think it is called bankruptcy.

Oak Cliff Townie
Oak Cliff Townie

I like the idea of some hidden trigger word that the City's outside Attorney can spring on them as they are told they are not Broke but self Screwed and in city exempting receivership at the same time .Being Asset rich and cash poor is going to be their down fall.

billmarvel
billmarvel

He's right, of course. Thinking is old fashioned and out-of-date.

Mister_Mean
Mister_Mean

Higher the risk the higher the supposed profits.   Having said that I am sure that Maddoff and his investments (and Stanford) were risky and had high payouts too before they went belly up (arrested, indite and convicted).   What happens when you treat investing like the going to Las Vegas is you end up loosing your shirt.    Those who have made these decisions should be liable like Maddoff at least for incompetence -- I have to wonder too if the motive was to bolster the politicos behind massive spending in the arts district (what better way to do so than to make a commitment of city employees funds for a project touted by city hall).

Anon
Anon

madoff was a fraud. he wasn't making investments. comparing the two makes no sense. 

Mister_Mean
Mister_Mean

Masking a gamble as an investment-miss representation of the product, viability and returns.  I guess it will be many years to see if this pays off (Museum Tower).    I would love to see occupancy numbers / vacancy numbers on all the high rise residentials in the downtown area.  

Mister_Mean
Mister_Mean

I guess that I am thinking of a primary conflict of interest—the city egging on the police & retirement fund investment vs the goal of promoting the arts district (all the various infrastructures, facilities and organizations) --- the “downtown” experience (from the city powers that be --a sort of “win win” that you hear in management speak(and motivational speakers))----though I am reminded of the management of  private corporations promoting employee stock investment of their company  to their employees   Not enough objectivity perhaps for my taste. But you are right there is no crime in being stupid-after all this is Dallas (city council, county and school government, et al).

Anon
Anon

it's not illegal to make bad investments. it's illegal to tell people you are making investments when you are really just cashing their checks and buying a yacht. get it? 

I don't think the vacancy numbers are as high as you'd guess, but then you've got properties like the House in Victory that has been a huge money loser.

Paul
Paul

Boy this guy has it all wrong when it comes to what he is supposed to be doing.  His priority is not "We're investing and building in America. We're creating new jobs and unmatched economic stimulus."  His sole priority is to be able to pay the benefits owed to the beneficiaries of the plan when the beneficiaries are eligible for the plan benefits.

I would like to know what percentage of the plan's assets are invested in this one building.  If it is over 5% then all of the plan trustees need to be replaced pronto.

Anon
Anon

3.1bn fund, 200mm investment in museum tower. the math isn't that hard. and I agree - that concentration in a highly risky, single site investment in real estate (which has negative carrying costs) is horribly imprudent. I do agree with him that diversifying out of stocks and bonds is necessary and valid strategy. but that isn't the same thing as sinking money into a politically motivated deal

Paul
Paul

 Thanks for the info ...

About 7% in a single investment and in one that is a speculative venture as opposed to a proven commercial project ....

What a bunch of maroons ...

These guys need to be ousted fast as trustees, in my opinion.

JimS
JimS

I don't want to believe in old-fashioned out-of-date thinking or so-called experts. I went to believe in a magic fireman who can beat the market. Then I want him to beat the market for me. I want this so badly. Can I make it true?

Paul
Paul

 Come on JimS, you know that we all want above average market returns.

Weren't Madoff and Stamford offering some CDs that did this?

primi_timpano
primi_timpano

 It looks like Police and Fire are trying to emulate Yale, Harvard and other aggressive endowments.  In 2011 Yale had about 805 of its assets in these alternative categories.  I haven/t checked, but I doubt if they are investing in the local housing market.  The problem with these copy cats like P&F is they do not have a David Swensen and first class dedicated investment team.  The P&F are mullet money and being feasted on by the lesser names of the investment world.  Google Yale Endowment and peruse the 2011 annual report.  P&F are chumps by comparison.

Yale has a staff of 23 assisting Swensen,not to mention a blue chip board of directors; and these are all investment professionals, not admin staff.  P&F looks looks like it has a few police and firemen and some city council members on its board.  Not even bush league class.  The chief investment officer is a has been from Republic Bank.

Yale also pays out a constant 5.2%, whereas the P&F need to have a portfolio that matches its pension liabilities.  There is a lot of home cooking (Lone Star, Highlands, Loomis Sayles) and a strange concentration in Huff investments.  With over $3B this pension can do much better.

Oak Cliff Townie
Oak Cliff Townie

"Frankly, I'm fed up with these so-called experts who think that social security and individual retirement accounts will save Americans from a live of poverty in their retirement," he says.Its what some of us are stuck with .I say If they are doing so well on their own It is time for the city to cut back its contributions to the Fund.Or as our company did Cut out 401 K style contributions Completely !

Engnmn
Engnmn

Hey Oak Cliff Townie.... My Fire Station Is in Oak Cliff , why don't you stop by sometime for Coffee. I would be happy to show you the chunk missing from my arm , that I recieved protecting your right to make your comments. Then perhaps we can talk what that's worth....

GinoRomano
GinoRomano

jonathan lee riches lawsuit against trayvon martin CNN BREAKING NEWS !   jonathan lee riches sued keith russell judd

Adam from East Dallas
Adam from East Dallas

Apparently, he didn't live in Texas during the Savings & Loan era or heard of Jimmy Hoffa and the Teamsters Pension Fund.

Amy S
Amy S

Anna, read Griftopia by Matt Taibbi, it's a great view of the real way financial markets operate (even still today, "post" recession). It's worth the time if for nothing other than the incredible insults he dishes out. And I can now say I'm reasonably sure, in rough terms, what a credit default swap is.

Scruffygeist, I'll agree with 2 of the 3. But the alternative energy spending, well if we don't try to build it someone else will. Then we'll just be paying "them", when we could be fostering our own industry. Not saying as much as military spending or NASA, but historically every renewed economy in America has come with a change in our sources of energy paired with advances in technology.

primi_timpano
primi_timpano

 There is a lot of pay to play in this sector of the financial industry, meaning money managers give kick backs to trustees, etc, for introductions and support.

Scruffygeist
Scruffygeist

Of course it needs to be spent, but there have also been some rather high-profile failures and struggles in both electric cars and solar power recently, and it popped into my head to pad out a joke. The emphasis needs to be as much on research as anything--the next decade or two will see some awesome new technologies come to market.

Scruffygeist
Scruffygeist

Well, in that case, invest in these amazing opportunities too:

Las Vegas real estateSolar panel and electric car manufacturing companiesGrouponAmerican Airlines

You're welcome! 

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